One of my clients handed me a 1099-OID today. That’s income to him, duly noted on his now-filed tax return. A different individual decided to promote a very different OID plan, an “O.I.D. Process.” He’ll be spending nearly six years at ClubFed.
Duffy R. Dashner (aka Kevin Dashner) was a resident of Reseda, California (in the San Fernando Valley area of Los Angeles). He and co-conspirators founded a business called O.I.D. Process. The business filed phony Original Issue Discount (OID) refund claims–a whopping 200 refunds claiming $228 million.
The OID refund scheme has been around for some time. There’s supposedly a secret account that you can have access to by just filing some Form 1099-OIDs. You just claim that the money was all withheld, so you didn’t get any of it, and soon you have a tax refund! What can go wrong (besides it being illegal)?
Anyway, Mr. Dashner decided to promote his business via website. He had weekly conference calls to clients to help them prepare the returns. They received a 20% “refund acquisition fee” for all checks issued by the IRS, and they demanded clients change their address to an unnamed attorney (well, the DOJ press release says he’s an attorney but who knows for how long that will continue) to make sure that the conspirators got their share of the ill-gotten gains. Clients also had to pay an up-front registration fee.
Mr. Dashner pleaded guilty in June to conspiracy to submit false claims. He received 57 months at ClubFed and must also make restitution of $1,769,418. If someone tells you there’s a magic way of anyone getting money from the IRS by filing a Form 1099-OID, run, don’t walk, in the other direction.